What Is Commercial Auto Insurance?

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Commercial auto insurance is a type of business insurance that covers motor vehicles used for business purposes, such as delivering inventory, ferrying passengers and traveling to client locations or project sites. Your personal auto policy won’t cover you for accidents that occur during commercial activity.

Similar to a personal auto policy, commercial car insurance will include liability coverage plus other state-required coverages, like uninsured motorist insurance. Business owners can also choose to add physical damage protection at an additional cost.

Some insurers charge commercial auto rates as low as $91 per month depending on your business. Keep reading to learn how commercial auto insurance can protect you and how it works.

How Does Commercial Auto Insurance Work?

Commercial auto insurance works similarly to personal auto insurance, in that it provides coverage for damages and injuries caused by an accident. The key difference: commercial insurance is specifically designed for vehicles used for business use, such as delivering inventory, traveling to client or project locations or if you sell from the vehicle itself, like a food truck.

Depending on your business needs, commercial auto insurance can cover the following types of motor vehicles:

  • Cars, SUVs and vans
  • Delivery trucks
  • Pickup trucks
  • Box trucks
  • Food trucks
  • SUVs
  • Trailers (may be automatically covered in existing commercial auto policy if meets insurer’s weight requirements)

A commercial auto policy base policy will meet your state’s minimum insurance requirements, which will include liability insurance. This coverage provides financial protection when a commercial vehicle can be held liable for a third party’s property damages or injuries. For example, if your employee rear-ends another car while driving a company car, then commercial auto insurance would pay for repairs to the other driver’s bumper and injuries the driver sustains.

Depending on your state, a commercial auto base policy will also include personal injury protection, and uninsured/underinsured motorist coverage (more on different coverages in a later section). Only New Hampshire and Virginia have flexible laws that allow some drivers to drive without commercial auto insurance. However, they will need to show proof that they can cover losses if they are liable for a car accident.

Is Personal Use Covered By Commercial Auto Insurance?

Depending on your insurance company, commercial auto coverage may be available when driving a commercial vehicle for personal use. However, the reverse does not apply.

A personal auto insurance policy will not cover you for auto accidents while driving the insured vehicle for commercial use.

Who Is Covered by Commercial Auto Insurance?

Commercial auto insurance will cover employees who drive a motor vehicle for commercial use. In some cases, it may even cover a family member if they are driving the company car. Confirm these details with your insurance provider.

What Type of Insurance Do I Need for My Business Fleet?

If your business has multiple commercial vehicles — a car rental or trucking company, for instance — then you should look into business fleet insurance. A commercial auto policy is better suited if you have only a few company cars that you want to insure. Business models that require the use of multiple commercial cars, vans or trucks should ask their insurer about fleet insurance instead.

Who Needs Commercial Car Insurance?

If your business regularly uses vehicles for business-related purposes, then you should have a commercial auto policy. Common types of businesses or professions that would benefit from a commercial policy include:

What If I Drive for a Rideshare or Delivery Company?

If you ferry food or passengers for a company like Uber or Lyft, then you may also be covered under the company. However, you are covered only during the time it takes for you to complete an “order.” After reaching the destination and completing the order, your personal auto policy will take over until you accept a new order.

How Much Does Commercial Car Insurance Cost?

According to Next Insurance, auto insurance monthly median rates can range from $91 to $223 per month depending on your business or profession. Other factors that can affect your premium include the type of car you drive, if you also drive the company car for personal use, your claims history and your driving history.

commercial car insurance median costs by profession infographic

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What Does Commercial Auto Insurance Cover?

Bodily injury and property damage liability is the most common coverage type because it is required in nearly all states. Below, we’ve outlined other types of coverage that may also be mandated in your state plus optional types of protections.

  • Bodily injury liability: Pays for medical bills when a company worker can be held responsible for injuries caused to another party while driving a company car.
  • Property damage liability: Pays for repair bills or reimburses for damaged belongings when a company worker can be held responsible for injuries caused to another party while driving a company car. Subject to a deductible.
  • Collision: Pays to repair or replace your company car if totaled in a car accident, regardless of who was the at-fault driver. Optional coverage but required by your lender or lessor if you are financing or leasing your company vehicle.
  • Comprehensive: Covers non-collision losses, such as fire, theft, hail and vandalism. Typically required by your lender or lessor if you are financing or leasing your company vehicle.
  • Uninsured/underinsured motorist: Covers your losses if the company car is involved in a car accident but the other driver is at fault but has no auto insurance or insufficient coverage.
  • Medical payments coverage or Personal injury protection (PIP): Provides medical, disability and death benefits for you or an employee after a car accident in a company car, regardless of which driver was at fault.

Insurance companies offer endorsements, which are add-ons to your base commercial auto policy, that can provide unique benefits. Roadside assistance, for example, will pay for tows and jumpstarts if your vehicle experiences a sudden breakdown and inland marine endorsement covers your equipment and tools during transit. Here are some common endorsements that may be useful depending on your business.

  • Hired and non-owned: Covers vehicles that are used for work but not owned by the company. For example, this coverage may apply when your employee rents a car and uses it to drive to a work-related convention.
  • For-hire livery: This coverage is for businesses that transport vehicles, such as a taxi service, hotel shuttle service or a rideshare driver.
  • Roadside assistance: Pays for tows, fuel delivery, battery jumpstarts and other emergency services when your company car breaks down at the roadside.
  • Gap: Covers the difference between the auto loan on your company car and its actual cash value if it was totaled in a car accident. For example, if your car was worth $10,000 and you still owed $15,000, gap insurance would cover the $5,000 difference.
  • Inland marine endorsement: Covers equipment, electronics and other physical business assets inside your company car if they were stolen or damaged in an accident.
  • Rental reimbursement: Pays for the cost of a rental car if your company car is temporarily unusable because it was totaled, stolen or in a repair shop due to a covered accident.
  • Personal property: Covers personal belongings that were inside your car that were damaged in a covered car accident.
  • Motor truck cargo: Covers the freight or commodity being hauled by a for-hire trucker.

What Isn’t Covered by Commercial Auto Insurance?

Commercial auto insurance will not cover you for the below types of losses:

  • Liability costs incurred outside a company vehicle (look into general liability insurance instead)
  • Personal property inside commercial vehicle
  • Intentional losses (e.g., filing a collision claim after intentionally driving the company car into a tree)
  • Medical bills when employee driving company vehicle for personal use (can depend on company)
  • Use of company vehicle for illegal activities
  • Wear and tear
  • Floods and earthquakes

How To Get Commercial Auto Insurance

Follow these steps to buy commercial auto insurance for your business:

  • Determine what type of commercial auto policy you need: You may need a specific type of auto policy depending on your business and the type of motor vehicles it uses. For example, if your business uses delivery trucks, you may need additional coverage versus buying a policy for a company car or van. Similarly, taxi services or rideshare contractors may need a for-hire livery policy.
  • Consider which coverage you need: Liability coverage is the most commonly required coverage but certain states may also require UI/UIM coverage and PIP. If you’re leasing or still paying off a loan, then you may also need physical damage (collision and comprehensive) coverage. Optional endorsements, like roadside assistance and inland marine coverage, are worth pondering, too.
  • Compile information: When shopping around for quotes, you will typically need to supply information, including your business model and industry, type of car (e.g., pickup truck vs. cargo van), VIN, whether the car is used for commercial or personal use or both, driving history, date of birth and more.
  • Compare rates from multiple insurers: Collecting quotes from at least five insurance companies can help you find the coverage you need at the lowest price available. Don’t forget to ask about available discounts, such as bundling your commercial auto policy with another insurance plan.
  • Buy your policy: After choosing an insurance provider, it’s time to sign on the dotted line and pay the premium to begin your coverage. Make sure you stay on top of your premiums or you will risk a lapse in coverage — you may not be covered for accidents during this time.
  • Shop around regularly: Market factors are always shifting and your insurance needs can change, as well. For example, you may need to add drivers to your commercial auto policy as you employ more workers or insure additional cars if your business expands. Shopping around at least once per year ensures you’re staying top of your coverage needs at the lowest price available.

FAQs

Who needs commercial auto insurance?

Any motor vehicle used for business use, such as a delivery or food truck, will need to be insured under a commercial auto policy. Otherwise, you will have to pay for losses out of pocket for any losses incurred during commercial activity.

Will my car insurance cover a business vehicle?

A personal auto policy will cover a business vehicle only when it’s being used for personal use, such as driving to the grocery store. Any accidents that occur while driving the car for business will not be covered.

What is the difference between personal and commercial auto insurance?

A personal auto insurance policy insures your car when driving your car for personal use, while a commercial auto insurance policy covers accidents that occur during commercial activity, such as traveling to a client location or transporting construction materials.

Key Takeaways

  • Commercial auto insurance is a type of insurance that provides coverage for vehicles used for business purposes, such as delivery trucks, company cars, and other vehicles used by employees.
  • Commercial auto policies include liability coverage and can include protection from physical damage to the vehicle and injuries sustained by the driver or passengers.
  • A personal car insurance policy will not cover losses incurred while driving a vehicle for commercial use.

Protect your business with the right commercial auto insurance policy. SmartFinancial matches business owners like you with an insurance provider who can work with your coverage needs and budget. Just enter your zip code below or call 855.214.2291 to receive your business car insurance quotes.

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